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Ag Economy (USDA Outlook Forum); Farm Bill; Regulations; and Political Notes
Posted By Keith Good On February 24, 2012 
Agricultural Economy (USDA Outlook Forum)
Reuters writer Charles Abbott reported yesterday that, “Global crop prices will retreat sharply this year as farmers around the world expand production to bring stability back to commodity markets and ease fears of food inflation, the U.S. government forecast on Thursday.
“After two years of razor thin stocks, world crop supplies, led by wheat, are recovering.
“‘Certainly the high prices that we saw last year have prompted a global production response for most commodities,’ USDA Chief Economist Joe Glauber told the agency’s annual outlook forum.”  (A copy of Dr. Glauber’s prepared remarks and slide presentation can be found here and here).
 
Mr. Abbott stated that, “There are still a number of uncertainties in the forecast, Glauber noted, such as drought withering crops in South America and in the southern United States.
“Weather, particularly in Texas, ‘will be a key concern this year,’ he said.
“Despite forecasts of lower prices, U.S. farmers are should go on a planting binge this year. Planting of the eight major crops in the United States were forecast to rise 2.2 percent to 254.4 million acres from 2011.”
More specifically, Bloomberg writers Whitney McFerron, Alan Bjerga and Joe Richter reported yesterday that, “The U.S. corn crop may rise as farmers plant the most acres since World War II, easing pressure on higher food and fuel prices, the government said. Soybean planting may be little changed while wheat expands.
“Farmers will sow corn on 94 million acres, up 2.3 percent from last year and the most since 1944, Joe Glauber, the chief economist for the U.S. Department of Agriculture, said today at a conference in Arlington, Virginia. The forecast was less than the 94.329 million expected by analysts in a Bloomberg News survey, and unchanged from an estimate in the USDA’s 10-year baseline report, released Feb. 13.”
Yesterday’s article added that, “Rising corn output and slowing demand for use in ethanol may boost U.S. inventories of the grain that shrank to a 16-year low in the past year. Average corn prices received by farmers in 2012 will be $5 a bushel, down 19 percent from last year, while wheat prices will slide 14 percent and soybeans may drop 1.7 percent, Glauber said.”
“Soybean planting may be unchanged from last year at 75 million acres, Glauber said. That’s above the 74 million forecast in the baseline report. Wheat seedings may increase 6.6 percent from last year to 58 million acres, above the Feb. 13 forecast of 56.5 million.”
A Dow Jones news article from yesterday reported that, “The U.S. farm economy has been booming, enjoying strong prices and record returns last year. Glauber expects a slight pullback in 2012 as supplies grow, prices soften and demand cools. Still, he projected farm income for the year will be the second highest on record and crop prices will remain above historic levels.”
Owen Fletcher and Ian Berry reported yesterday at The Wall Street Journal Online that, “The potential for a big crop, and a subsequent steep drop in prices, is a concern for farmers who are planting more corn because it gives them the best shot at strong profits in the face of rising costs. Land rent is one cost that has risen sharply in the last year.
“Falling prices are ‘in the back of my mind every day,’ said Anthony Mock, a farmer in Kintyre, N.D., who plans to plant about 2,500 acres of corn this year, up from less than 2,000 a few years ago.”
The Journal article noted that, “Total U.S. agricultural exports are likely to be $131 billion in fiscal 2012, the second-highest on record behind 2011, as higher global crop production brings down prices and export volumes, Mr. Glauber said.”  (USDA also released a detailed report on trade, “Outlook for U.S. Agricultural Trade,” yesterday).
In other developments on trade, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Mexico, along with Canada and Japan, is considering joining the ongoing negotiations aimed at bringing about the Trans-Pacific Partnership, a free trade agreement comprising Pacific Rim nations. U.S. and Mexican officials met last week to discuss the topic and to chart the best way for Mexico to consult with interested parties in Mexico so as to smooth the way for joining the talks.
“Earlier this month, officials from the Office of the U.S. Trade Representative met with Canadian and Japanese trade officials to consult with them on their interest in joining the nine-party TPP talks. Canada, Mexico, and the United States also are members of the North American Free Trade Agreement, which entered into force in 1994. Mexico is the United States’ second largest export market, with U.S. exports to Mexico increasing by more than 20 percent in 2011.
“Trade observers believe that if the TPP meets the expectations of many of the participants, it will be more than simply a free trade agreement. As envisioned, the TPP also could bring about changes in countries’environmental and labor standards as well as the elimination of state trading enterprises that otherwise are permitted under rules established by the World Trade Organization.”
And in other news on the agricultural economy, University of Illinois Agricultural Economists Scott Irwin and Darrel Good indicated in an update posted yesterday at the farmdocdaily blog (“The Historic Pattern of U.S Winter Wheat Yields, Any Implications for 2012?”) that, “The U.S. average winter wheat yield was below trend value in 2011. Market sentiment favors a return to trend yield in 2012. Here we examine the pattern of yields from 1960 through 2011 (Figure 1) to identify any patterns that might be helpful in forming expectations for 2012. See our earlier posts for similar observations for corn and soybean yields in 2012.”
Yesterday’s update concluded by noting that, “We estimate the trend yield for U.S. winter wheat in 2012 to be 47.5 bushels per acre based on data from 1960-2011. For any particular year, including 2012, history suggests a 48 percent chance of an average U.S. winter wheat yield above trend and a 52 percent chance of an average yield below trend value. The odds slightly favor a winter wheat yield below trend in 2012. More specific expectations about the 2012 average yield will unfold as the crop comes out of dormancy and spring weather prospects emerge. The USDA will release the first yield forecast on May 10th.”
And Chuck Raasch reported yesterday at USA Today Online that, “High prices of corn, wheat and other commodities, low interest rates, investors seeking better returns than can be found in the stock market or bank CDs, and bullish predictions of demand for food in Asia and elsewhere have produced record net farm income. As a result, cash is coming to the land about as rapidly as corn, wheat and soybeans are leaving it.
“Many individuals in farm communities — doctors, lawyers, business owners — who in the past put savings in the bank or the stock market are sinking it into land. So are investment funds dedicated to farmland purchases.”
Yesterday’s article added that, “As a result, farmland ownership ‘is probably the least leveraged we have had for a long, long time,’ says Terry Kastens, an emeritus agricultural economist at Kansas State University who now farms corn, wheat, sorghum and peas in western Kansas. ‘People have more cash. Individuals are choosing not to borrow any more from a risk perspective. Lenders are not just pushing money at you yet, like the late ’70s.’
“The Agriculture Department predicts that net farm income in 2012 will be the second-highest on record, at $91.7 billion, down 6.5% from 2011. But the USDA is forecasting a 5.9% rise in farmland values this year.”
 
Farm Bill and Policy Issues
DTN Ag Policy Editor Chris Clayton reported yesterday that, “A bipartisan group of former U.S. agriculture secretaries joined current cabinet member Tom Vilsack at the USDA Outlook Forum to defend USDA’s programs and the importance agriculture plays in society.”
The DTN article noted that, “Sen. Mike Johanns, R-Neb., who served as agriculture secretary from 2005-2008, sits on the Senate Agriculture Committee now, which is working to write the next farm bill. He noted agricultural prices are in a good spot currently. Johanns is cognizant of the budget issues facing the farm bill, but thinks some of the issues facing agriculture concern the message.
“‘We have got a tremendous challenge to make the case that food security is about national security,’ Johanns said.”
Alan Bjerga reported yesterday at Bloomberg that, “U.S. Senator Mike Johanns, a Republican from Nebraska who led USDA under President George W. Bush, said he is optimistic that the Senate will approve a farm bill, while the legislation’s fate in the House of Representatives ‘is much more unpredictable.’
“Subsidies predicted to reach $11 billion in 2012 are under scrutiny as Congress begins crafting the legislation, which will authorize spending for all USDA programs, including farmer payments, food stamps and rural development. The payments, while providing a safety net for farmers, encourage production and lower commodity costs for Cargill Inc. and Archer Daniels Midland Co.
“Subsidies are ‘not the only issue we should be talking about,’ [former Secretary of Agriculture Dan Glickman] said. ‘The biggest challenge is our research budget,’ he said. ‘You look at the world 20 and 30 and 40 years out, you wonder, do we have the ability to have another Green Revolution’ that can boost productivity to meet global needs, he said.”
Sarah Gonzalez reported yesterday at Agri-Pulse Online that, “Agriculture Secretary Tom Vilsack told the 150th Ag Outlook Forum today that creative solutions need to be included in the next Farm Bill for beginning farmers and ranchers.
“‘As we shape the Farm Bill, it’s important we provide due consideration to people wanting to start farming,’ Vilsack said. ‘We have to address barriers to the transfer of land buried in our tax system.’”
Yesterday’s Agri-Pulse article added that, “While acknowledging that many areas of the Farm Bill would be reduced, he [Sec. Vilsack] noted that research should be one area that grows to ‘meet the food, fiber and fuel demands of the future.’”
Several lawmakers are using time away from Washington, D.C. this week to meet with their constituents about agricultural issues and the Farm Bill.
News reports indicated that, Rep. George Miller (D., Calif), House Agriculture Committee Member Bill Owens (D., N.Y.), Senate Agriculture Committee Chairwoman Debbie Stabenow (D, Mich.) and Rep. Cory Gardner (R., Colo.) all held, or will be holding policy related meetings with voters this week.
And House Agriculture Committee Members Steve Southerland (R., Fla.) and Martha Roby (R., Ala.) posted updates on Twitter highlighting constituent meetings on agriculture recently.
Rep. Southerland noted yesterday  (@Rep_Southerland) that, “About to begin our listening session at the Jackson County ag conference center. Will be discussing farm bill with local farmers.”  While Rep. Roby tweeted earlier this week (@RepMarthaRoby ) that, “Met w/ my Agriculture Advisory Committee in Pike County. Proud that all 16 AL-02 counties are represented on the panel: on.fb.me/zl4FqL”
And a news article yesterday from the Marshall Independent (Marshall, Minn.) reported that, “Staff members working for both U.S. Sen. Al Franken and U.S. Congressman Collin Peterson were in Marshall, gathering public concerns and feedback as the Senate prepares to debate the 2012 bill.”
Meanwhile, an update posted yesterday at The Oklahoma Farm Report Online stated that, “Oklahoma agricultural producers urgently need a new farm bill that provides a strong safety net for farm income using a combination of crop insurance, a revenue assurance program and price protection. That’s the message recently delivered by the Oklahoma Farm Bureau Farm Bill Committee.
“‘We encourage farm groups to work together to support Cong. Lucas and Sen. Stabenow to get the new farm bill passed quickly,’ committee chairman Scott Neufeld said. ‘We’re concerned if this is not passed by July 1, it will not be passed this year. Continued delays by Congress to pass the new farm bill will reduce the farm program’s effectiveness.’”
 
Regulations
DTN writer Todd Neeley reported yesterday that, “CropLife America and other interveners are seeking the dismissal of a lawsuit that could affect the use of hundreds of common agriculture chemicals across the country.
“A motion was filed Wednesday in the U.S. District Court Northern District of California seeking to dismiss the lawsuit filed by the Center for Biological Diversity in January 2011. In the motion, Responsible Industry for a Sound Environment, Southern Crop Production Association, Western Plant Health Association and Mid America CropLife Association, American Chemistry Council and Reckitt Benckiser LLC, argue that the CBD lawsuit is ‘fundamentally flawed’ because it did not offer specific actions EPA should take that should have resulted in consultations with federal wildlife officials on the effects of the chemicals on of endangered species.
“The American Farm Bureau Federation filed a motion in support of the motion to dismiss, according to court documents.”
Ben Protess reported in yesterday’s New York Times that, “Federal regulators are narrowing a list of possible new safeguards for customers at futures firms, a response to the collapse of MF Global and the disappearance of more than $1 billion in client cash.
“The Commodity Futures Trading Commission will hold a public roundtable next week to discuss policy changes, including a plan that would allow customers to trade through futures brokerage firms without keeping their excess cash there, according to a copy of the agenda provided to The New York Times.
“The plan, which would allow customers to keep their cash at clearinghouses rather than brokerage firms, is gaining support in pockets of the regulatory world. The commission is also circulating an internal list of more than 10 other ideas, including keeping customers updated on the whereabouts of their money and creating an insurance fund to backstop losses in customer accounts.”
 
Political Notes
An article posted yesterday at the Marshall Independent (Minn.) reported that, “Democratic U.S. Congressman Collin Peterson on Wednesday said he knew he needed to pick up about 70,000 people in the once-a-decade redistricting process, and even though his already-widespread district grew this week, it’s nothing compared with the last time this process played out.
“While Peterson’s unsure if he’ll be part of the political arena the next time redistricting comes around 10 years from now, he said taking on a few more counties won’t be a problem this year.”
The article pointed out that, “‘I think it’s the Democrats that the people are more upset with, with everything that’s going on in this country, but I’m not seen in that vein,’ [Rep. Peterson] said. ‘We don’t have the big issues in my district because the farming has been so strong, and frankly, manufacturing has been strong. We don’t have the unemployment numbers in my district like they have in some places; housing, there never really was a bubble. We’re like in a different world out here and we’re lucky.’
“On the Farm Bill, which expires in September, Peterson isn’t sure whether Congress will be able to advance legislation.
“‘The Farm Bill is gonna be a big thing this year, obviously in my district where agriculture is the primary industry, but it’s unclear whether we’ll be able to get it done because of all the partisanship going on and the budget,’ he said. ‘We’re working with the Senate, we put together that supercommittee bill, but it will be the main focus for me. But people are concerned about the deficit – I am as well and we need to get something done with that, because we can’t keep running up these deficits.’”
And Kathie Obradovich penned an interesting item yesterday at The Des Moines Register Online regarding the Congressional race between House Agriculture Committee Member Steve King (R., Iowa) and Democrat Christie Vilsack.
 
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Keith Good
President
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Champaign, IL
(t) 217.356.2269
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